Next 3, 4 months crucial for business survival

Due to the pandemic, manufacturers stock in hand accumulates, and financially, cash turnover will be slow. Stephen Hii Hium Ung

KUCHING: The next three or four months will be the period that will make or break manufacturers – including here in Sarawak – as they find their footing again after the Covid-19 pandemic hampered the economy.

This was the sentiment shared by Sarawak Manufacturing Association (SMA) secretary general Stephen Hii Hium Ung, who said the situation will become “more clear, more serious in another 3, 4 months.”

Speaking to reporters after a courtesy visit to His Excellency Yonny Tri Payitno, the Consulate General Republic of Indonesia on Wednesday, Hii outlined the plight faced by the manufacturing industry.

“Due to the pandemic, manufacturers stock in hand accumulates, and financially, cash turnover will be slow,” he explained.

“Some factories are struggling to stay open, whereas some are closing down, depend on the industry. For example, building material industry is facing some problem because of short of construction workers, so a lot of building material suppliers such as the timber industry supply experience slowdown.

“Many are facing financial problems in the sense that there are a lot of stock in-hand at the moment and they are unable to sell (post-Covid-19),” Hii said.

Hii forewarned that for Sarawak itself, the worsening situation may stretch out until the end of the year.

“For Sarawak, I think by the end of this year, (conditions) are seriously getting worse. New companies just setting up may close down, and as for those companieswho has been in the market for a long time and have enough cash funding, maybe they can still sustain.

“The full effect will only be known during the fourth quarter, so we will see the real thing between September and November.”

This tallies with data from the FMM-MIER Business Conditions Survey for the first half of 2020 (1H20) which revealed business conditions slumping.

According to the survey, business activity in Malaysia will likely be scaled down in the coming months as attested by most (48 per cent) respondents, up from the previous period’s 34 per cent, while only 24 per cent are expecting their businesses to pick up soon.

“Projections on domestic and export sales in the next six months are both lacklustre,” the survey revealed.

“Around 49 per cent of the respondents who sell locally and 50 per cent of those who export are bracing for a dip in their sales in the months ahead.

“The expected indices for production volume and capacity utilisation also plunged to their lowest levels in the latest survey – 36 per cent of the respondents will likely cut down on their production, while 24 per cent are looking into expanding theirs.”

The survey also said that those considering operating at lower capacities rose to 46 per cent from 30 previously, while 24 per cent will increase their capacities soon.

Meanwhile, capital expenditure (capex) and hiring in the manufacturing sector are expected to slow down further in the coming months. 19 per cent of the respondents are planning to increase their capex soon, while another 36 per cent are contemplating lowering theirs.